The local chief of one of China’s biggest banks, the Bank of Communications, has declared foreign lenders are well positioned to win business from domestic banks in Australia, saying the local financial services sector is underserviced.

China’s fifth-largest commercial bank, which was granted a wholesale banking licence last year, is initially focusing on serving companies working in China and Australia.

In a rare media interview for a Chinese bank executive, Hongde Yu, local general manager of Bank of Communications, said he planned to extend into retail banking within five years, including loans and deposits.

He said there were only about 30 ­foreign banks in Australia, compared with more than 300 international banks in Germany, where he previously worked.

“The competition for the client is missing and means the foreign banks have enough space to enter Australia," Mr Yu told The Australian Financial Review in Sydney on Tuesday. “Compared with the European and US market, Australia is attractive for the profit of the banking sector."

Amid a heated political debate about the influence of Chinese investment in Australia, Mr Yu said Australian businesses should welcome investment by foreign banks.

“Many European banks have deleveraged themselves from Australia and in many instances Australian ­companies are actively seeking funding from Asian financial services organisations such as ourselves," he said

Company Profile

Bank of Communications is a part state-owned institution listed on the Shanghai stock exchange. Its shareholders include global bank HSBC, which owns about 10 per cent. It has global assets worth $US810 billion, just ahead of Commonwealth Bank with assets of $719 billion. The bank, which is expanding internationally, has 12 foreign branches, including in the United States, United Kingdom and Europe.

It was granted a licence to conduct wholesale banking in Australia last October and opened its first branch in Sydney in November. It has a joint-venture life insurance business in China with Commonwealth Bank.

Mr Yu said the big five banks in China were prudentially managed and any risks were confined to smaller regional players, although the problems were not likely to be material. He said Chinese banks operated with relative autonomy from their shareholders, like Australian banks. “Locally we have a leadership and governance structure that allows commercially acceptable risk-taking to occur when assessing specific asset opportunities or positioning our portfolio," he said.

Bank of Communications’ Australian branch, which has about 30 staff, has about $700 million in loans outstanding to companies. While the bulk of the loans are to Chinese companies doing business in Australia, it is seeking to add as clients Australian companies doing business with China.

Two-way trade between Australia and China, our largest trading partner, has surged through the $100 billion mark over the past year, with exports to China accounting for $71.5 billion and imports $42.1 billion. This presents opportunities for banks in providing loans, trade finance, foreign exchange and settlement.

Active in commercial loans, syndications, money markets and trade finance, Bank of Communications is aiming to grow its assets in Australia to $1 billion by the end of this year and to $3 billion by 2013. Mr Yu emphasised this would be done in a “sustainable" fashion, with prudent diversification and risk management practices. The bank plans to open offices in Melbourne, Brisbane and Perth over the next few years, before applying for a retail banking licence.

The retail plans would initially target wealthy Chinese customers and Chinese students studying in Australia, although the strategy could eventually extend to the mass market. Mr Yu said the prudential regulator’s strict policing of local banks was a positive and another reason why Bank of Communications had been attracted to Australia.

With economists increasingly focused on China’s economic slowdown and the health of its banks, Mr Yu expressed confidence in its outlook. Though growth has slipped to about 7.5 per cent, he forecast it would rebound to between 8 per cent and 8.5 per cent.